A debate has emerged in the cryptocurrency community over the tokenization of stocks, with Robinhood CEO Vlad Tenev arguing that public companies should not automatically control blockchain products that reference their shares.
The dispute began after AMC CEO Adam Aron criticized Robinhood for creating tokenized AMC exposure without AMC's approval. Aron expressed frustration on social media, calling the practice "contemptible, outrageous, disgusting, detestable, inexcusable, vile" and questioning how it could be legal.
Tenev's Position on Issuer Control
In a recent appearance on CNBC's Squawk Box, Tenev defended Robinhood's approach. He argued that while issuers should control the rights and obligations of their own stock, that control doesn't extend to other companies issuing separate securities that reference those shares.
Tenev based his argument on the principle that once shares are publicly traded, investors have certain property rights over them. He contended that blockchain distribution should not grant the original company additional veto powers over tokenized versions.
Under Robinhood's structure, each token represents a separate financial instrument backed 1:1 by shares held in traditional markets.
A Test for When Consent Is Needed
Tenev proposed that issuer approval should be necessary only if a token actually changes the rights associated with the underlying stock. If the token is simply a separate financial instrument backed by existing shares without modifying those underlying rights, the issuer's permission shouldn't automatically be required.
Historical Parallels and Market Access
Tenev also argued that tokenization could make U.S. stocks accessible to people around the world. He referenced the securities industry's 1960s paperwork crisis, when massive amounts of stock certificates required physical processing. The industry eventually shifted toward electronic recordkeeping and book-entry settlement to resolve the problem.
This transition aligns with the SEC's recent proposal to allow blockchain ledgers to become the official legal record of securities ownership, potentially replacing the need for separate on-chain and off-chain ownership records.
